Changes to the Superannuation age : thoughts?

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Forums › Finance and wealth management › Changes to the Superannuation age : thoughts?

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#1732605 7-Mar-2017 15:47

evilengineer:

tdgeek:

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

And what was the average house price/income multiple back then? 2.5 to 3?

And what is it now? 8+?

Plus five years worth of 10% 1970s/80s style inflation with pay rises of a similar amount would soon make those eye watering early payments much more manageable.

That's not going to happen these days with your 2% (if your lucky) pay rises. Crippled for years!

Once again, the boomers haven't had it so bad. :-)

About 2 to 3 yes. Whatever gen you are in, your paying a lot of pay packet to a mortgage. So the issue is not the house value its the affordability, and in both gens a large slice of the pay packet was paid on a mortgage. The small interest rates make a $300,000 house easily a $550,000 when you look at payments and the household budget

Yes, inflation did take care of a hit of the mortgage.

But again, blame the boomers, or blame the time? Were boomers evil? What would todays gen do in those times? The same. The boomers parents built new homes with one income plus cost of raising kids. Different times. Actually in 1990 I took my two young girls to North Queenland, CHC to BNE, then one hour to Mackay. $2500 at 1990 salaries. Today for that is a lot better, things are just different. People are inherently the same

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#1732607 7-Mar-2017 15:49

mattwnz:

evilengineer:

tdgeek:

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

And what was the average house price/income multiple back then? 2.5 to 3?

And what is it now? 8+?

Plus five years worth of 10% 1970s/80s style inflation with pay rises of a similar amount would soon make those eye watering early payments much more manageable.

That's not going to happen these days with your 2% (if your lucky) pay rises. Crippled for years!

Once again, the boomers haven't had it so bad. :-)

The question is what do people want? Million dollar houses with an interest rate of 3-4%. Or a $300k house with an interest rate of 15-20%. I know which one I would prefer, and it won't be the million dollar house.

It's the exact same house. Costing the same share of the pay packet. But yeah, the smaller number sounds better

mattwnz

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#1732608 7-Mar-2017 15:55

tdgeek:

mattwnz:

evilengineer:

tdgeek:

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

And what was the average house price/income multiple back then? 2.5 to 3?

And what is it now? 8+?

Plus five years worth of 10% 1970s/80s style inflation with pay rises of a similar amount would soon make those eye watering early payments much more manageable.

That's not going to happen these days with your 2% (if your lucky) pay rises. Crippled for years!

Once again, the boomers haven't had it so bad. :-)

The question is what do people want? Million dollar houses with an interest rate of 3-4%. Or a $300k house with an interest rate of 15-20%. I know which one I would prefer, and it won't be the million dollar house.

It's the exact same house. Costing the same share of the pay packet. But yeah, the smaller number sounds better

The big difference is that buying one way encourages borrowing, which increases the countries private borrowing. This is now becoming a major problem as shown in this article http://www.interest.co.nz/property/86377/imf-warns-nz-household-debt-levels-proposes-better-cgt-land-tax-says-rbnz-should-have While the other way, encourages people saving to buy a house with a bigger deposit or outright. We are always enouraged to save, but the system at the moment doesn't provide a benefit to saving, especially with the low interest rates.

Back in the 80's when my parents purchased a house, they actually saved almost the entire amount, as getting a loan back then wasn't as common and the rates were very high. They even had to get a bank manager who had to come out to inspect the property, for the small 20k or so that they borrowed!

Geektastic

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#1732609 7-Mar-2017 15:57

Heard someone on the radio this morning claiming it was 'racist' because Maori and Pacific people do not live so long. That seemed like a long bow to draw to me. Mind you, the same person claimed that "the government is there to look after you" which was an odd idea.

To hear some of the people interviewed, you would think that they were expecting to retire on a lot more than the very modest $600 or so per fortnight that the payments are for a married couple.

marej

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#1732616 7-Mar-2017 16:04

I purchased a central Auckland home in 2002 @ 350K and earning just shy of 50K, so x7 and interest rates in the earlier years were 10% plus. Pretty normal stuff, that said the issue being missed here is that living longer does not necesssarily equate to being able to working longer.

Those that can work longer do and receive an abated pension today.

This will just turn from housing to jobs in that young people cant make headway into the job market because the older folk arent retiring, and sickness and disability pensions will just rise.

Geektastic

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#1732617 7-Mar-2017 16:05

sbiddle:

The problem is people are unwilling to accept that a fully state funded pension simply isn't possible with an ageing population. You either need to raise the age or make superannuation mandatory with significant government incentives.

The who topic is an unpopular one because nobody wants to make the tough decisions. Labour pledged it for the last 2 elections, but now that National are for it Little has changed his mind. Winston on the other hand is scaremongering probably telling 80 year olds that they're going to get their super cut.

Nobody is forcing people to work until they're 67, and Kiwisaver will be available from 65.

Also, the older people won't have had that long to put money in their KS funds compared to someone entering the workforce today and saving to it for the next 40 years or so. KS should be mandatory and contributions should be from your gross income.

mattwnz

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#1732626 7-Mar-2017 16:22

Geektastic:

sbiddle:

The problem is people are unwilling to accept that a fully state funded pension simply isn't possible with an ageing population. You either need to raise the age or make superannuation mandatory with significant government incentives.

The who topic is an unpopular one because nobody wants to make the tough decisions. Labour pledged it for the last 2 elections, but now that National are for it Little has changed his mind. Winston on the other hand is scaremongering probably telling 80 year olds that they're going to get their super cut.

Nobody is forcing people to work until they're 67, and Kiwisaver will be available from 65.

Also, the older people won't have had that long to put money in their KS funds compared to someone entering the workforce today and saving to it for the next 40 years or so. KS should be mandatory and contributions should be from your gross income.

The thing is that Winston Peters tried bringing in a compulsory super scheme back in the 90's, and it was a referendum, but NZ voted against it. They have now introduced a voluntary system, which will likely become compulsory, as they chip away at it. SO it is interesting how the public is worked around like this.

But these systems are really just like paying more in tax, so instead of paying your money into the big tax pool, your money just goes to you, but you don't end up paying less tax. So effectively they are like a rise in tax. There are both pros and cons to this.

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afe66

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#1732635 7-Mar-2017 16:42

If you let me take pension contributions out of my gross salary and presumably don't charge me tax, you will miss out now in 36% which you will have to make up somewhere else for a benefit in 20 yrs+ when current government not around...

A.

MikeB4

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#1732637 7-Mar-2017 16:57

Any changes to Super needs to be done gradually as any saving for old age is a very slow thing. Olso if the spending power of a large percentage of the population is diminished then all ages are adversely affected by a slow down of the economy and rising unemployment.

The worse thing the whole topic of super brings about is the inevitable age abuse and bigotry.

afe66

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#1732655 7-Mar-2017 17:15

Don't forget hypocrisy ...

tdgeek

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#1732661 7-Mar-2017 17:42

afe66:
tdgeek:

afe66: Let's be honest, either get rid of any asset stripping for rest home costs or stop the farce of hiding all the assets in "trusts".

My parents and all their baby boomer friends have done this but they all talk about "their houses, batches"

A.

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

My point isn't about how hard things were in the past. Lots of things were harder in the past but some were easier too. I loved the 20% interest on my term deposit from fruit picking at school in 1986!!!

I'm just calling for real world honesty here. Currently we expect people with assets to contribute to costs of their rest home care but make it too easy to hide from this by placing assets in farcical trusts.

So it you have 50k you will have to play but if your millions are hidden in trusts, you don't.

I'm just calling for end of asset stripping for all or get tougher of trusts that are effectively just tax avoidance strategies.(or my preference an inheritance tax)

A.

I agree on the asset hiding my post was just about the bad baby boomers!

tdgeek

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#1732674 7-Mar-2017 18:06

mattwnz:

tdgeek:

mattwnz:

evilengineer:

tdgeek:

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

And what was the average house price/income multiple back then? 2.5 to 3?

And what is it now? 8+?

Plus five years worth of 10% 1970s/80s style inflation with pay rises of a similar amount would soon make those eye watering early payments much more manageable.

That's not going to happen these days with your 2% (if your lucky) pay rises. Crippled for years!

Once again, the boomers haven't had it so bad. :-)

The question is what do people want? Million dollar houses with an interest rate of 3-4%. Or a $300k house with an interest rate of 15-20%. I know which one I would prefer, and it won't be the million dollar house.

It's the exact same house. Costing the same share of the pay packet. But yeah, the smaller number sounds better

The big difference is that buying one way encourages borrowing, which increases the countries private borrowing. This is now becoming a major problem as shown in this article http://www.interest.co.nz/property/86377/imf-warns-nz-household-debt-levels-proposes-better-cgt-land-tax-says-rbnz-should-have While the other way, encourages people saving to buy a house with a bigger deposit or outright. We are always enouraged to save, but the system at the moment doesn't provide a benefit to saving, especially with the low interest rates.

Back in the 80's when my parents purchased a house, they actually saved almost the entire amount, as getting a loan back then wasn't as common and the rates were very high. They even had to get a bank manager who had to come out to inspect the property, for the small 20k or so that they borrowed!

Here is another take

1. People don't go out house hunting to buy a $600,000 house, although they will say that. In fact they go out to buy the best house they can based on the deposit they have and what repayments they can afford. The end price really isn't that important. Like any gen, they are using a proportion of their income to determine what house they want. The low interest rates add a great deal to the end price they will and can pay.

2. These days, while wage increases are in the 2% range, many couples have found a way to get a 100% increase. These days, they hold off having kids, they marry later, its common to live off one salary and save the other. So, as times change, they have markedly reduced the salary to house ratio. Its human nature, supply and demand, if there is a way, we will find it.

Geektastic

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#1732768 7-Mar-2017 22:11

mattwnz:

Geektastic:

sbiddle:

The problem is people are unwilling to accept that a fully state funded pension simply isn't possible with an ageing population. You either need to raise the age or make superannuation mandatory with significant government incentives.

The who topic is an unpopular one because nobody wants to make the tough decisions. Labour pledged it for the last 2 elections, but now that National are for it Little has changed his mind. Winston on the other hand is scaremongering probably telling 80 year olds that they're going to get their super cut.

Nobody is forcing people to work until they're 67, and Kiwisaver will be available from 65.

Also, the older people won't have had that long to put money in their KS funds compared to someone entering the workforce today and saving to it for the next 40 years or so. KS should be mandatory and contributions should be from your gross income.

The thing is that Winston Peters tried bringing in a compulsory super scheme back in the 90's, and it was a referendum, but NZ voted against it. They have now introduced a voluntary system, which will likely become compulsory, as they chip away at it. SO it is interesting how the public is worked around like this.

But these systems are really just like paying more in tax, so instead of paying your money into the big tax pool, your money just goes to you, but you don't end up paying less tax. So effectively they are like a rise in tax. There are both pros and cons to this.

NZ is fairly unusual in taxing personal pension contributions and in not overtly encouraging private pension saving, instead relying on the state. No sane person in the majority of Europe, for example, would expect to live on the state pension unless they had no choice: they would save into a scheme which normally gives them tax relief throughout their working lives and (until very recently at least) was required to be used to purchase an annuity to give an annual income (in addition to any state entitlement they may have).

Perhaps an option like this would be worth considering as an additional way to reduce the reliance on the state, which could then amend the state payments - possibly by having say a basic minimum everyone gets (to retain the universal nature which seems popular) with a top up which is means tested somehow.

mattwnz

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#1732806 8-Mar-2017 00:17

MikeB4: Any changes to Super needs to be done gradually as any saving for old age is a very slow thing. Olso if the spending power of a large percentage of the population is diminished then all ages are adversely affected by a slow down of the economy and rising unemployment.

The worse thing the whole topic of super brings about is the inevitable age abuse and bigotry.

From what I understand, the change isn't being done slowly. It is occurring in about 20 years, but the transition period only lasts a few years. When it would make more sense for them to stagger the change over a long period of time. Pretty sure they recommended doing it over a long period of time.

However is this actually going to happen, because they can't do it until their next term, and currently no other party looks like they will support this. They need another party to support it on current numbers, if they want to get it though. So I think this is purely political spin/ distraction, to get people distracted off the real problems. A bit like the whole flag thing, which is the only thing I remember JK for, apart from the cycle trail.

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#1732865 8-Mar-2017 09:50

English has said himself in the past that Super is not unsustainable.

This is worth a read:

http://www.stuff.co.nz/the-press/opinion/90092989/chris-trotter-abandoning-keys-pledge-on-superannuation-an-act-of-astonishing-political-folly

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